Magellan reels as rock star investor Douglass abandons the stage

On Thursday Magellan’s founder Hamish Douglass delivered a sermon to a throng of small investors with a key message to avoid the emotional roller-coaster of market movements. By Sunday morning, when he contacted Magellan’s deputy chairman, Hamish McLennan, Douglass had succumbed to professional and personal stress.

On Sunday afternoon after the board finished a series of emergency meetings, it hit the button on contingency plans it had already in place – to bring Magellan’s co-founder, Chris Mackay, back into the executive fold to oversee the portfolio and elevate McLennan to sit in the chairman’s role vacated by Douglass.

The board had clearly seen it coming.

It seems that Douglass, the rock star fund manager, has smashed his guitar. The private and personal pressure he was under had put an understandable but significant strain on his mental health.

What was until this week, ‘Hamish and the Magellans’ is now being rebranded as an orchestra – a team whose names had been largely hidden under a bushel for the past seven years while Douglass dominated the stage.

For the fund manager who had underperformed the market and had lost its chief executive, Brett Cairns, and one of its largest investment mandates, there were hopes that placing Douglass on sick leave for an unspecified time would provide a much-needed circuit breaker.

The market didn’t see it that way on Monday morning – by lunch the shares had tumbled 12.2 per cent.

Investors are now clearly factoring in the potential for further outflows of funds from Magellan and with it further profit downside.

The ratings agencies will be taking a fresh look at Magellan through the lens of Douglass’ leave of absence, and December’s sudden resignation of Cairns. (Cairns’ departure was never properly explained by the company but was apparently the result of staff issues with his management style.)